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CALIFORNIA CORPORATE & SECURITIES LAW

Is There A “Revlon Duty” In California?

There are certain seminal Delaware corporate law cases that are so well known that corporate lawyers are wont to assume that they have been adopted and followed everywhere.  One such case is Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (1986).  In that case, the Delaware Supreme Court famously proclaimed that once…

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Did The Harvard Shareholder Rights Project Prove Itself Wrong?

In December 2014, Stanford Law School Professor Joseph A. Grundfest and Daniel M. Gallagher incited an academic titanomachy when they released a draft of an academic paper provocatively entitled “Did Harvard Violate Federal Securities Law?  The Campaign Against Classified Boards of Directors“.  In this case, “Harvard” was the Harvard Shareholder Rights Project which described itself as “a clinical program operating at…

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California And Van Gorkom

As a corporate lawyer, it is hard to ignore the Delaware Supreme Court’s opinion in Smith v. Van Gorkom, 488 A.2d 858 (1985) overruled on other grounds Gantler v. Stephens, 965 A.2d 695 (Del. 2009).  Professor Stephen Bainbridge has called it “one of the most important corporate law decisions of the 20th century” and Bernard Sharfman has…

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California And The “Entitled To Vote” Standard

Recently, I came across a proxy statement for a California corporation that stated the vote required for shareholder action on several proposals was “the affirmative vote of the majority of the shares represented at the Annual Meeting and entitled to vote on such matter”.  While this statement was consistent with the voting standard enunciated in…

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Failure To Return Shares Subject To Repurchase Right Supports Conversion Claim

Closely held issuers often include a repurchase right in their equity award agreements.  I expect that in most cases, shareholders will comply with these provisions.  When a shareholder doesn’t, the company’s most obvious cause of action will be for breach of contract.  Conversion is a less obvious cause, but according to the California Court of Appeal, a viable claim nonetheless. …

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Continuing Confusion About Shareholder Approval Requirements

I continue to read confused statements in proxy statements about the vote required for shareholder action.  The default voting rule in Delaware is found in Section 216(2) of the Delaware General Corporation Law: In all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by…

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Improper Purpose Frustrates Member’s Assertion Of A Proper Purpose

The inspection rights of members of California nonprofit mutual benefit corporations mirror those of shareholders of corporations under the General Corporation Law. Section 8333 of the Corporations Code provides that the accounting books and records and minutes of proceedings of the members and the board and committees must be open open to inspection upon the…

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Court Finds Lawsuit By Corporation Against Minority Shareholder Is “Protected Activity”

SLAPP is the initialization of the phrase “strategic lawsuit against public participation”.  A more informative description of SLAPP suits is found in Simpson Strong-Tie Co., Inc. v. Gore, 49 Cal.4th 12, 21 (2010): “A SLAPP is a civil lawsuit that is aimed at preventing citizens from exercising their political rights or punishing those who have done so.…

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How The Proposed Fix To Delaware’s Stockholder Consent Statute Can Be Fixed

Earlier this week, I wrote about a proposed amendment to Section 228 of the Delaware General Corporation Law.  The amendment, which is proposed by The Corporate Council of the Corporation Law Section of the Delaware State Bar, would essentially condition the effectiveness of a stockholder consent upon the delivery of a sufficient number of consents with 60…

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After 25 Years, Delaware Begins To See The Light

A quarter century ago, I wrote a brief piece criticizing how Delaware handled stockholder action by written consent: Another difficulty with section 228 arises from its focus on the date of the “earliest dated consent delivered” to the corporation.  The emphasis on the date of the consent in section 228 contrasts markedly with the focus…

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